Those who fail to read their policies will get shafted!

Published: Sunday | January 13, 2013 Comments 0

Cedric Stephens, Contributor

Question: Our
18-year-old son acquired his learner's licence last year. He has done several lessons with a driving school and will sit the test soon. We were also planning to allow him to drive the family vehicle under parental supervision, but have not done so. Our insurers have advised that our motor policy does not cover learner drivers. We were also told our premium would increase by 140 per cent when he gets a full licence. What are some of the liabilities for both the learner driver and the vehicle owner if an accident occurs? Are there any insurers who offer coverage for learner drivers?

- D.H., Kingston 8.

HELPLINE: Many thanks for posing two thought-provoking questions. 'M', my regular walking partner, and I recently spoke about the spanking new 'L plates' fitted to her big sports utility vehicle. They were clearly visible and, it appeared, fully compliant with one of the five rules for the use of a provisional driver's licence.

One of M's children was learning to drive. However, she had not sought the advice of her motor insurers before fitting the 'L plates'. She had overlooked the regulation regarding insurance and learner drivers. Happily, you did not make that mistake.

Zipsell.com - http://www.zipsell.com/jm/help/help_learners3.htm - lists the requirements for the use of a local provisional or learner's licence. Zipsell's rule No 5 says: "The vehicle must be licensed and insured, with the specification that it can be used by someone other than the owner."

The insurance part of that statement is wrong. Insurance can apply to someone "other than the owner" - for example, someone with a full licence - and yet exclude learner drivers.

As you have found out, your insurer shuns learner drivers. Other insurers, mine for example, are more tolerant.

Provided that the other driver is "licensed in accordance with the regulations and is authorised to operate the vehicle", coverage will apply. In other words, drivers with provisional licences are insured provided that they comply with all of the applicable regulations and are authorised to drive. Each insurance company makes its own rules.

Contracts of insurance have different kinds of exclusion clauses. Your policy says learner drivers are not covered. To use a term associated with economics and marketing, that is a market-segment exclusion.

Market segment

A market segment is "a group of people that share one or more characteristics". In your case, the market segment is learner drivers.

For more information on the subject, see: http://www.investopedia.com/terms/m/market-segment.asp#ixzz2HbsctATq.

When this type of label is used to describe an exclusion clause, it removes some of the negative associations that are linked to the business of insurance in general and this kind of clause in particular. Further, it opens windows of opportunity to solve problems.

Market-segment exclusions are not absolute. Insurers use them to separate and price risks in the selected group or groups from other kinds of risks. For example, there are different kinds of learner-driver risks. The ones associated with a school that teaches students to drive as a business are different from those of a family whose vehicle is occasionally used, say 10 per cent in a given year, to provide parentally supervised driving lessons to a child.

By placing a market-segment exclusion in the motor policy that insures a family vehicle, your insurer may be signalling that it may be willing to consider the removal of the exclusion on a case-by-case basis, when asked.

If a request for the removal is not made, the exclusion remains in force. The average insurance buyer and, even persons who work in the insurance industry, unfortunately, often cannot tell what market - segment exclusion is. Those who fail to read and understand their policies - to misquote our minister of finance - are the ones who will get shafted!

Contact a senior official of your insurer. Share your plans about providing your son with parentally-supervised lessons with him/her. Stress that you will try to transfer driving skills to your son instead of simply helping him to pass an examination - which is what some driving instructors do.

The Government is planning to introduce new regulations for the issuing of driving permits or licences. Sources say that a graduated system for new drivers is one of the measures.

Explain to the insurance company that your involvement in the transference of driving skills will be consistent with those plans. Your motor policy should, therefore, be altered to accommodate those changes.

Cedric E. Stephens provides independent information and free advice about the management of risks and insurance. Send feedback to aegis@cwjamaica.com or SMS/text message to 812-7233

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